CORPORATE SERVICES AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
_______________, 1996, by and between MANOR CARE, INC., a Delaware corporation
("Manor"), and CHOICE HOTELS HOLDINGS, INC. (to be renamed Choice Hotels
International, Inc.), a Delaware corporation ("Choice").
RECITALS
WHEREAS, pursuant to a Distribution Agreement (the "Distribution
Agreement") dated as of ____________, 1996, Choice and Manor agreed to enter
into a corporate services agreement with the terms and conditions set forth
herein;
WHEREAS, Manor shall retain the personnel and systems formerly utilized
in the administration of the services described herein; and
WHEREAS, Choice desires to retain Manor as described herein, and Manor
desires to render such assistance on an equitable, arms length basis for a fee.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Choice and Manor agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
terms shall have the meanings indicated unless the context requires otherwise:
"Accounting Period" shall be a one month period.
"Accounting Systems Support" shall mean data preparation and other
related accounting procedures required to perform the Functions in a timely
manner, consistent with current policies and procedures, and in accordance with
generally accepted accounting principles.
"Accounts Payable Services" shall have the meaning described in
Exhibit A.
"Additional Consulting Services" shall mean the additional services
related to the Functions, or any other services which Manor may provide Choice
from time to time (on a transitional basis and only where such services shall
not unreasonably interfere with Manor's business operations and will not cause
Manor to incur additional expense without reasonable compensation therefor).
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"Ancillary Agreements" shall have the meaning described in the
Distribution Agreement.
"Construction Accounting Services" shall have the meaning described on
Exhibit A.
"Consulting Services" shall have the meaning described in Exhibit C.
"Conversion Services" shall mean the initial conversion of Choice's
business data from Manor to Choice and archiving Choice's business accounting
records for certain periods prior to the Distribution Date to the extent not
already performed prior to the execution of the Distribution Agreement.
"Corporate Accounting Support" shall have the meaning described on
Exhibit A.
"Corporate Services" shall mean Conversion Services; Support Services;
Facilities Services, the Functions, the Consulting Services and the Additional
Consulting Services.
"Distribution" means the distribution to the holders of Manor Care
Common Stock all the outstanding shares of Choice Common Stock.
"Distribution Date" means the date determined by the Board of
Directors of Manor as the date on which the Distribution shall be effected.
"Facilities Services" shall mean the Silver Spring Computer Services,
Telecommunication Services, Travel Management Services, the Model Room Services,
and certain other services listed on Exhibit A.
"Functions" shall mean Payroll Services, Accounts Payable Services,
Corporate Accounting Systems Support, Property Accounting Services and
Construction Accounting Services for Choice's Lodging Business as listed on
Exhibit A.
"Lodging Business" shall mean any business or operation of Choice or
the Lodging Subsidiaries (as defined in the Distribution Agreement) which is,
pursuant to the Distribution Agreement, to be conducted, following the
Distribution, by Choice.
"Model Room Services" shall mean the provision of the model rooms, the
model food count, provision of storage areas and the maintenance of the building
in which such services are conducted at the Silver Spring location, which shall
consist of obtaining space for such model rooms and the cost of normal building
operating costs, but which does not include costs of maintaining personal
property of Choice used in connection with such model rooms, nor the cost of
constructing, maintaining or reconfiguring such model rooms. "Payroll Services"
shall have the meaning described on Exhibit A.
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"Prime Rate" shall be the rate identified from time to time in the New
York edition of the Wall Street Journal as being the Prime Rate of interest;
should such rate be shown as a spread of rates, then the highest such rate shall
be utilized.
"Property Accounting Services" shall have the meaning described on
Exhibit A.
"Support Services" shall mean the support services needed to perform
the Functions and Facilities Services, including but not limited to Accounting
Systems Support and Systems Support.
"Systems Support" shall mean the computer hardware, computer software,
and telecommunications, including data transmission, data distribution, report
generation, and data entry capabilities needed to process Choice's information
for each Function and Facilities Service.
"Travel Management Services" shall have the meaning described on
Exhibit D.
Any capitalized terms defined in the Distribution Agreement and used
herein shall have the meanings ascribed to them in the Distribution Agreement
unless otherwise defined herein.
2. Services. Upon the request of Choice, Manor shall provide the
Corporate Services provided herein:
(a) Manor shall provide Choice with Support Services for the Functions
and Facilities Services in substantially the same manner as such
services are being provided to the Lodging Business on the Distribution
Date. Manor reserves the right to change the manner in which it
provides Accounting Support and Systems Support related to the
Functions and Facilities Services described herein, provided such
change is consistent with changes made for Manor's own business units
and provided Manor give Choice notice of such change (the same notice
Manor will provide its own businesses).
(b) Manor shall also provide Choice with Conversion Services at the
cost of Manor to provide such Services.
(c) Choice may request that Manor provide Consulting Services and
Additional Consulting Services from time to time. Consulting Services
shall be provided on the terms and conditions specified on Exhibit C.
The parties will agree, at the time such services are requested, upon
the scope and final pricing for any Additional Consulting Services.
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Whenever the parties deem necessary, Manor will draft an arrangement
letter outlining the scope of Additional Consulting Services,
deliverables, cost, and schedule for Choice's acceptance.
(d) Manor agrees to provide such services only if it reasonably
believes the service will not interfere with the conduct of the
business of Manor or pose an unreasonable burden.
3. Term. The term of this Agreement shall commence on the Distribution
Date and shall remain in effect through the end of the first full Fiscal Year
immediately following the Distribution Date. Unless terminated pursuant to the
terms hereof, the Agreement shall automatically renew each Fiscal Year
thereafter for the extended term of said Fiscal Year and shall not extend past
the last day of the thirtieth (30th) month following the Distribution; provided,
however, that Choice may terminate this agreement or any services provided
hereunder (other than the Consulting Services) at any time for any reason or no
reason upon sixty (60) days' prior written notice to Manor. This Agreement may
also be terminated in the event of a default (past the expiration of any
applicable cure period provided herein) in accordance with the provisions of
this Agreement.
4. Database Access. Choice will regularly enter all required
information into the appropriate computer systems to enable Manor to provide the
Corporate Services contracted for hereunder. Manor will provide access to these
computer systems to enable Choice to maintain its employee, vendor, property and
general ledger databases. Choice will provide access to information and
employees necessary for Manor to provide such Corporate Services.
5. Price and Payment. Choice shall pay Manor for services requested
and rendered hereunder as follows:
(a) The charging mechanisms for rates or charges for each service shall
include (i) activity-based charges where the per unit price will be
multiplied by the variable number of units (for example, the number of
employees times the employee charge will determine the per Accounting
Period charge); (ii) fixed fee based charges, meaning a fixed amount
per Accounting Period for Manor to perform the service; (iii) usage
based charges for which Choice will pay according to actual use of the
service; (iv) time and materials charges; or (v) a variation or a
combination of any of the foregoing methods as agreed to by the
parties. Charging mechanisms for each Corporate Service are identified
on Exhibit B except with respect to Consulting Services which shall be
paid for in accordance with Exhibit C. If at any time during the term
of the Agreement, Choice moves its office location from 10750 Columbia
Pike, Silver Spring, Maryland, both the availability of certain
services and their associated rates may be subject to change.
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(b) Except as provided in any Ancillary Agreement, Choice shall pay any
and all additional costs and expenses which Manor may incur for the
express purpose of providing services to Choice.
(c) Choice shall pay Manor on a time and materials basis for all costs
incurred by Manor in converting Choice business information and records
from Manor's services systems to either a third party provider or to
Choice.
(d) Payment for all services hereunder (other than Consulting Services)
shall be made by Choice to Manor within thirty (30) days of receipt of
invoice for payment (with appropriate supporting documentation for any
out-of-pocket expenses). Choice shall pay fixed charges in advance on
the first business day of the applicable Accounting Period. Any
payments not made by Choice to Manor when due shall bear interest,
computed daily, from the date due to the date of payment based on the
annual percentage rate equal to the Prime Rate, as same may vary from
time to time, plus two (2) percentage points.
6. Duty of Care.
(a) Manor's Obligations. All services provided hereunder shall be
administered in accordance with Manor's standard policies, procedures
and practices in effect as of the date hereof and as may be changed,
and as more particularly described below, or as otherwise specified in
accordance with the terms thereof. In so doing, Manor shall follow
commonly accepted standards of care in the industry and exercise the
same care and skill as it exercises in performing like services for
itself.
(b) Choice's Obligations. Choice shall adopt reasonable measures to
limit its exposure with respect to any potential losses and damages,
including, but not limited to, periodic examination and confirmation of
results, provision for identification and correction of errors and
omissions, preparation and storage of backup data, replacement of lost
or mutilated documents, and reconstruction of data.
7. Liaison. Choice and Manor shall each appoint two managerial level
individuals (hereinafter "Representatives") to facilitate communications and
performance under this Agreement. Each party may treat an act of a
Representative of the other party as being authorized by such other party
without inquiring behind such act or ascertaining whether such Representative
had authority to so act. The initial Representatives are named on Exhibit E.
Each party shall have the right at any time and from time to time to replace
either or both of its Representatives by giving notice in writing to the other
party setting forth the name of (i) each Representative to be replaced and (ii)
the replacement, and certifying that the replacement Representative is
authorized to act for the party giving the notice in all matters relating to
this Agreement.
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8. Confidentiality.
(a) Manor and Choice agree that all information regarding the Corporate
Services provided hereunder, including, but not limited to, price,
methods of operation, and software, shall be maintained in confidence
and not be released to any third party for any reason whatsoever,
excluding such parties' counsel, agents, auditors or lenders. However,
one party may release this Agreement or such information to a third
party upon the prior approval of the other party (such approval not to
be unreasonably withheld, conditioned or delayed), upon court order, or
as required by any rules, regulations or laws. All confidential and
proprietary information which either party has obtained from the other
shall be returned upon the expiration or earlier termination of this
Agreement. The provisions of this paragraph shall survive expiration or
earlier termination of this Agreement.
(b) Any Choice information or other information provided by Choice to
Manor for use with the Corporate Services provided hereunder and
identified in writing as confidential shall remain the exclusive and
confidential property of Choice. Specifically, Choice's employee
database and payroll information shall be deemed confidential. Manor
shall treat such information as confidential and will not disclose or
otherwise make available any Choice information to any person other
than employees, consultants, or auditors of Manor with a need-to-know
or except as required by law or court order. Manor will instruct its
employees who have access to the Manor information to keep the same
confidential by using the same care and discretion that Manor uses with
respect to its own confidential property and trade secret.
(c) Manor will provide reasonable security provisions to insure that
third parties do not have access to Choice information. Manor reserves
the right to issue and change regulations and procedures from time to
time to improve file security.
(d) Manor will take reasonable precautions to prevent the loss or
alteration of Choice information. Choice will, to the extent it deems
necessary, keep copies of all source documents delivered to Manor and
will maintain a procedure external to Manor's systems for the
reconstruction of lost or altered Choice data.
(e) Manor will, to the extent applicable, retain Choice's information
in accordance with and to the extent provided by Manor's then
prevailing records retention policies for similar activities. Manor
will, in conformity with its then prevailing records retention
policies, dispose of all Choice information in any manner deemed
appropriate by Manor unless Choice, prior to such disposal, furnishes
to Manor written instructions for the disposition of such Choice
information, at Choice's expense. At Choice's request Manor will
provide Choice,
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in a standard Manor format and at Manor's then standard
rates for such format, any and all Choice information requested by
Choice.
(f) Manor's systems used to perform the Corporate Services provided
hereunder, including but not limited to the payroll system, are
confidential and proprietary to Manor or third parties. Choice shall
treat these systems and all related procedures as confidential and
proprietary to Manor or its third party vendors. Choice agrees that all
software systems, procedures, and related materials provided to Choice
are for Choice's internal use exclusively and only as related to the
Corporate Services or any of the underlying systems used to provide
Corporate Services hereunder. Choice may not sell, transfer, assign, or
otherwise use the Corporate Services provided hereunder, in whole or in
part, for the benefit of any other party. Choice shall not copy,
modify, reverse engineer, or in any way alter these systems without
Manor's express written consent. Title to all software systems used in
performing the Corporate Services provided hereunder shall remain in
Manor or its third party vendors.
9. Warranties and Limitations of Liability.
(a) MANOR DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT
NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE CORPORATE SERVICES
PROVIDED HEREUNDER. Manor will use reasonable efforts to perform the
Corporate Services provided hereunder in a professional and workmanlike
manner but the results of the Corporate Services are furnished "as is."
(b) Manor's sole liability to Choice or any third party for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of errors or omissions in the Corporate
Services provided or to be provided by Manor hereunder which are caused
solely by Manor shall be to furnish correct information, payment,
and/or adjustment in the Corporate Services provided hereunder provided
that Choice promptly advises Manor thereof.
(c) Manor's sole liability to Choice or any third party for claims,
notwithstanding the form of such claims (e. g. contract, negligence or
otherwise), arising out of the unavailability of the Corporate Services
provided hereunder or the interruption in or delay in performing the
Corporate Services provided hereunder for any reason beyond Manor's
reasonable control shall be to use all reasonable efforts to make such
services available, and/or to resume performing the Corporate Services,
as promptly as reasonably practicable. Manor will maintain the same
back-up procedures for Choice's information that Manor has for its own
information.
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(d) MANOR SHALL NOT BE LIABLE FOR ANY ERRORS, OMISSIONS, DELAYS, OR
LOSSES UNLESS CAUSED SOLELY BY ITS CRIMINAL CONDUCT, FRAUD, BAD FAITH
OR GROSS NEGLIGENCE. CHOICE AGREES THAT IN NO EVENT WILL MANOR BE
LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES.
CHOICE FURTHER AGREES THAT IN NO EVENT WILL THE TOTAL AGGREGATE
LIABILITY OF MANOR FOR ANY AND ALL CLAIMS, LOSSES, OR DAMAGES ARISING
UNDER THIS AGREEMENT AND FOR THE CORPORATE SERVICES PERFORMED HEREUNDER
EXCEED THE VALUE OF CHOICE'S PAYMENT FOR SAID SPECIFIC CORPORATE
SERVICE IN DISPUTE OVER ONE FOUR-WEEK ACCOUNTING PERIOD'S TIME.
(e) The forgoing provisions of this Section 9 set forth the full extent
of Manor's liability hereunder (monetary or otherwise) for any claim or
action, regardless of the form in which any such claim or action may be
asserted against Manor (e.g. contract, negligence or otherwise).
10. Default. If either party materially defaults hereunder, the
non-defaulting party may terminate this Agreement effective immediately (subject
to the cure periods set forth herein below) upon written notice to the
defaulting party. The non-defaulting party shall be entitled to all remedies
provided by law or equity (including reasonable attorneys' fees and costs of
suit incurred). The following events shall be deemed to be material defaults
hereunder:
(a) Failure by either party to make any payment required to be made to
the other hereunder, which failure is not remedied within five (5) days
after receipt of written notice thereof; or
(b) Except as otherwise provided herein, failure by either party
substantially to perform in accordance with the terms and conditions of
this Agreement, which failure is not remedied within thirty (30) days
after receipt of written notice from the other party specifying the
nature of such default; or
(c) (i) Filing of a voluntary bankruptcy petition by either party; (ii)
filing of an involuntary bankruptcy petition against either party which
is not withdrawn within sixty (60) days after filing; (iii) assignment
for the benefit of creditors made by either party; or (iv) appointment
of a receiver for either party.
11. Modification of Procedures. Manor may make changes from time to
time in its Functions and Facilities Services, standards and procedures for
performing the Corporate Services provided hereunder, but Manor will not
implement any substantial changes, unless required by law affecting Choice until
it has furnished Choice notice (the same notice Manor will provide its own
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businesses) thereof and a reasonable opportunity to adapt its operations to
accommodate such changes or to reject the change. Choice's decision whether or
not to accept the proposed change must be made on or before the date Manor makes
its decision. Otherwise, the default would be Choice's acceptance. Choice agrees
to pay any charges (a) resulting from Manor's need to maintain different
versions of the same systems, procedures, technologies, or services and (b)
resulting from requirements of third party vendors.
12. Laws and Governmental Regulations. Choice shall be responsible for
(a) compliance with all laws and governmental regulations affecting its business
and (b) any use it may make of the Corporate Services to assist it in complying
with such laws and governmental regulations. While Manor shall not have any
responsibility for Choice's compliance with the laws and regulations referred to
above, Manor agrees to use reasonable efforts to cause the Corporate Services to
be designed in such manner that they will be able to assist Choice in complying
with its applicable legal and regulatory responsibilities as related to the
Corporate Services. For example, Manor's normal procedure is to monitor and keep
current all federal, state, and local withholding information for its own
payroll processing. Manor will implement these normal procedures for Choice's
benefit. In no event, however, shall Choice rely solely on its use of the
Corporate Services in complying with any laws and governmental regulations.
13. Indemnification.
(a) Choice. Choice shall indemnify, defend and hold harmless Manor and
its directors, officers and employees from Losses (as defined below),
other than Losses directly and proximately caused solely by Manor's
criminal conduct, fraud, bad faith, or gross negligence. The term
"Losses" shall include costs of any claim, lawsuit, settlement,
judgment, penalty, or reasonable attorneys' fees.
(b) Manor. Manor shall indemnify, defend and hold harmless Choice and
its directors, officers and employees from Losses directly and
proximately caused solely by Manor's criminal conduct, fraud, bad
faith, or gross negligence, unless the actions (or inaction) causing
the Losses were taken (or not taken) at the specific direction of
Choice, its subsidiaries, employees, or agents.
14. Force Majeure. Manor and Choice shall incur no liability to each
other due to a failure to perform under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other event beyond each other's reasonable control. In
addition, Manor shall not be liable or deemed to be in default for any delay or
failure to perform hereunder resulting, directly or indirectly, from any cause
beyond Manor's
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reasonable control, including limitations upon the availability
of communications facilities or failures of other communications equipment or
failure of Choice to prepare data properly for input into the Corporate Systems.
15. Relationship of Parties. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship of buyer and seller.
16. Assignment. Neither party shall, without the prior written consent
of the other, assign any rights or delegate any obligations under this
Agreement, such consent not to be unreasonably withheld, conditioned or delayed.
17. Headings. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define or limit the
scope or intent of any provision or part hereof.
18. Severability of Provisions: Neither Manor nor Choice intend to
violate statutory or common law by executing this Agreement. If any section,
sentence, paragraph, clause or combination of provisions in this Agreement is in
violation of any law, such sections, sentences, paragraphs, clauses or
combinations shall be inoperative and the remainder of this Agreement shall
remain in full force and effect and shall be binding upon the parties.
19. Parties Bound. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing herein, expressed or implied, shall be construed to give any
other person any legal or equitable rights hereunder.
20. Notices. All notices and other communications hereunder shall be
in writing and shall be delivered by hand or shall be deemed to have been
properly made and given one (1) business day after being deposited with a
reputable overnight courier service such as Federal Express, Airborne Express or
UPS Next Day Air for next business day delivery or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and shall be deemed given on the date on which such notice is received:
To Choice:
Choice Hotels Holdings, Inc.
10750 Columbia Pike
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Silver Spring, MD 20901
Attention: General Counsel
To Manor:
Manor Care, Inc.
11555 Darnestown Road
Gaithersburg, MD 20878-3200
Attention: General Counsel
21. Further Action. Manor and Choice each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
22. Waiver. Manor and Choice each agree that the waiver of any default
under any term or condition of this Agreement shall not constitute any waiver of
any subsequent default or rights herein or nullify the effectiveness of that
term or condition.
23. Governing Law. All controversies and disputes arising out of or
under this Agreement shall be determined pursuant to the laws of the State of
Maryland, United States of America, regardless of the laws that might be applied
under applicable principles of conflicts of laws.
24. Consent to Jurisdiction. The parties irrevocably submit to the
exclusive jurisdiction of (a) the Courts of the State of Maryland in Montgomery
County, and (b) the United States District Court for the State of Maryland for
the purposes of any suit, action or other proceeding arising out of this
Agreement.
25. Entire Agreement; Amendment. This Agreement and the Distribution
Agreement constitute the entire understanding between the parties hereto and
supersedes all prior written or oral communications, relating to the subject
matter covered in this Agreement. This Agreement shall not be amended except by
a writing executed by the parties hereto.
26. Commercially Reasonable Terms and Conditions. The terms and
provisions of this Agreement are intended to reflect commercially reasonable
terms and conditions (including, but not limited to, pricing) that are at least
as favorable and as competitive to Choice as the terms and conditions Manor
would grant or require of third parties for substantially similar goods and
services.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHOICE HOTELS HOLDINGS, INC., a
Delaware corporation
By:/s/James A. MacCutcheon
Name:James A. MacCutcheon
Title:Executive Vice President &
Chief Financial Officer &
Treasurer
MANOR CARE, INC., a
Delaware corporation
By:/s/ James H. Rempe
Name:James H. Rempe
Title: Senior Vice President
and Secretary
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EXHIBIT A
[ATTACHED]
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PAYROLL SERVICES
Payroll Service. Beginning as of the Distribution Date, Manor shall
provide Payroll Service to Choice. Manor, as part of providing Payroll Service,
shall provide access to the Payroll System to enable Choice to maintain its
employee database (e.g., basic employee information, insurance data, retirement
plan deduction data, collective bargaining agreement data, etc.) The scope of
Payroll Services includes:
Issue
o Paychecks with authorized signature facsimile and alternatively
the capability of ACH direct deposit bank for employees who elect
that option. Paycheck stub statements and direct deposit
statements.
o Payroll check registers and other management reports currently
available on Manor's payroll system.
o Issue year-end form W-2s to all employees. Produce W-2C
(corrections) and reissue W-2s as necessary.
Payment and accrual features
o Vacation and sick leave
o Car allowance payments and imputed income for company car usage
o Relocation data/through contract with Armslong
o Employee payroll tax returns and deposits/through contract with
Ceridian STS.
o Standard systems interface capabilities which may be modified at
Choice's expense and with Manor's consent. These interfaces
include general ledger for accounting distribution, accounts
payable for wage attachment disbursements, if appropriate on the
new PeopleSoft system check reconciliation system interface,
retirement savings, employee stock purchase plan, medical
benefits administration, unemployment claims data, and ACH for
direct bank deposits.
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SERVICES NOT INCLUDED IN THE BASELINE PAYROLL SERVICES CHARGE
o Manor Payroll System for Choice's use; provided, however, that
any such additional features and functions shall be deemed
enhancements to the Payroll System and shall remain the property
of Manor. Any requested enhancements are subject to Manor's
consent. Such enhancements would be provided for under a separate
consulting arrangement and would be paid for by Choice under the
terms stipulated in a separate consulting agreement. If Manor
subsequently uses substantially all of such enhancement for its
own payroll processing, Manor will reimburse Choice for the cost
of such enhancement.
o Choice will develop any computer software necessary to
electronically transmit Choice's employee timeclock information
in batch form into Payroll System. Manor will review and approve
any electronic transmission prior to being implemented.
o Manor will accept paper submission of source documents until
Manor provides on-line or batch transmission features to Choice.
o Other services which are billed directly to Choice, such as:
- United States Postal Service, UPS, and other courier
services to deliver payroll envelopes and packages.
- Computer operations costs related to Payroll System usage.
o Any training or support requirements outside Manor Headquarters
or any support for Choice acquisitions and divestitures are
outside the scope of the fixed price. These services will be
charged on a time and materials basis.
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ACCOUNTS PAYABLE SERVICES
Accounts Payable Service. The scope of Accounts Payable Services includes:
o Choice will submit paper source documents in accordance with the
established Company policies and Manor will process them on a
timely basis.
o Manor will establish new vendors on the Vendor Master File and
change basic vendor information such as remittance address and
payment terms.
o Accounts payable check stubs and other forms of remittance
advice, and accounts payable checks with authorized signature
facsimile.
o A variety of management control and information reports in
conventional paper format using laser and impact printing
technologies, such as:
1. AP070 - weekly check register
2. AP055 - excess memo report weekly report which lists all vendors
with credit balances by company and vendor number currently in
the A/P system.
3. AP090 - schedule of bills - this weekly report is designed to
list invoices paid or invoices to be paid in vendor alphabetical
order (approximately 60 days of history).
4. AP810A - vendor list - lists all active lodging vendors by
facility number.
5. AP810B - vendor list for facility 706 only.
6. AP810C - vendor list for facilities 700 - 799
7. AP211 - executive committee large check report - this report
lists all payments greater than $5,000.00.
8. AP004 - daily vendor maintenance edit validation - records all
vendor additions, changes and deletions to a vendor's name,
address or tax ID number.
9. AP130 - purged vendor listing - lists all temporary vendors
purged from the vendor file (90 days from entry date).
10. AP120 - duplicate report - highlights through several variations,
all possible duplicate payments.
11. APM010 - manual check register - this is a list of all hand
checks on a given day.
12. AP301 - keypunch report - tabulates the number of invoices and
journal entries keyed during a day's time for each key punch
operator.
13. AP302 - processor operators list - tabulates the total of
invoices processed daily per A/P processor.
14. AAPV0 - void register - lists total of void/stop payment batches
keyed.
15. APM030 - manual checks to be printed.
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16. AP400 - daily report which shows deletions and changes of payable
invoices.
17. APBC03 - batch status
18. AAPTRAIL - AAP dupe vendor maintenance
19. GL001 - online G/L entry
20. GL002 - worksheet log
21. GL003 - deletions on G/L
22. GL2000 - transaction log - lists all transactions daily, to be
posted to the General Ledger.
o Standard system interface capabilities that may be modified at
Choice's expense and with Manor's consent. These include general
ledger for accounting distribution, drafts for check
reconciliation, and fixed assets.
SERVICES NOT INCLUDED IN THE BASELINE ACCOUNTS PAYABLE SERVICE CHARGE
o Manor Accounts Payable System features solely for Choice's use;
provided, however, that any such additional features and
functions shall be deemed enhancement to the Accounts Payable
System and shall remain the property of Manor. Such enhancements
would be provided for under a separate consulting arrangement and
would be paid for by Choice under the terms stipulated in a
separate consulting arrangement. If Manor subsequently uses
substantially all of such enhancement for its own accounts
payable processing Manor will reimburse Choice for the cost of
such enhancement.
o Choice will develop any computer software necessary to
electronically transmit invoice information from other Choice
feeder systems into the Accounts Payable System for subsequent
processing and payment.
o Other services which are billed directly to Choice, such as:
- United States Postal Service, UPS, and other courier services to
deliver accounts payable envelopes and packages from the Silver
Spring Computer Center.
o Any training or support requirements outside Manor Headquarters
or any support for Choice acquisitions and divestitures are
outside the scope of the fixed price. These services will be
charged on a time and materials basis.
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PROPERTY ACCOUNTING SERVICES
Property Accounting Services. Beginning as of the Distribution Date,
Manor shall provide Property Accounting Services to Choice. These Property
Accounting Services shall encompass functions to ensure system and accounting
control over fixed assets belonging to Choice as may be agreed upon by the
parties on a time and materials basis.
CONSTRUCTION ACCOUNTING SERVICES
Construction Accounting Services. Beginning as of the Distribution
Date, Manor shall provide Construction Accounting Services to Choice. These
Construction Accounting Services shall encompass functions to ensure system and
accounting control over acquisition improvement construction projects and new
building construction/development projects belonging to Choice as may be agreed
upon by the parties on a time and materials basis.
FACILITIES SERVICES
Facilities Services. Beginning as of the Distribution Date, Manor
shall provide Computer Services and Telecommunication Services to Choice.
Telecommunication Services shall encompass the following services:
1) Telephone and voicemail help desk support.
2) Moving, adding or changing telephones and/or programming voicemail
parameters for Choice employees.
3) Providing local and long-distance dial-tone.
4) Providing access and services of the corporate PBX switch.
Computer Services shall encompass payroll, accounts payable and
corporate accounting services. These services are further defined above in this
exhibit.
CORPORATE ACCOUNTING SUPPORT
Beginning as of the Distribution Date, Manor shall provide certain
Corporate Accounting Support to Choice. This support shall encompass functions
associated with monthly and year-end closing and financial reporting processes
as may be agreed upon by the parties on a time and material basis. Such
functions shall include, but not necessarily be limited to:
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Maintenance of general ledger chart of accounts and company profile
information
Consolidation of Choice financial information
Monthly financial reporting
Reconciliation of bank accounts
Preparation and reconciliation of debt report
Maintenance (including microfiche) of journal entries and other
financial records
Assistance with year end closing
Review of various financial reports Preparation of certain journal
entries and allocations
Any change required by Choice to the accounting software shall be determined on
a time and materials basis.
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EXHIBIT B
[ATTACHED]
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CORPORATE SERVICES CHARGES
Attachment B
- ------------------------------------------------ ---------------------------
SERVICE CHARGE BASIS
- ------------------------------------------------ ----------------------------
- ------------------------------------------------ ----------------------------
Payroll Activity Based Charges
Accounts Payable Activity Based Charges
Property Accounting Activity Based Charged
Construction Accounting Activity Based Charges
Corporate Accounting Support Time and Materials
Computer Services Activity Based Charges
Telecommunications Services Activity Based Charges
Model Room Services Fixed
Fee Based Charge of
$100,000 per year,
payable in equal
monthly installments
of $8,333.33 each.
Additional Consulting Services
Additional Consulting Services Hourly Billing Rates
- ---------------------------------------------- ------------------------------
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EXHIBIT C
CONSULTING SERVICES
A. Services to be Rendered. From and after the Distribution Date,
Manor shall provide the following consulting and advisory services to Choice;
(a) review and evaluate current operations and performance of Choice
with reference to period, quarterly and annual operating, capital
expenditure and other financial statements and reports,
(b) inspect and evaluate Choice operating facilities,
(c) review and evaluate Choice's organizational and personnel
structure,
(d) review and evaluate staffing needs and advise on performance of
key Choice operating executives,
(e) evaluate and review the compensation and benefit structure under
which Choice employees are compensated,
(f) review and evaluate Choice's proposed annual operating budget,
capital expenditures budget and business strategic review,
(g) review and evaluate new business opportunities (including renewals
and extensions of existing contracts) for Choice , including proposed
acquisitions or any capital expenditures or equity investments related
(h) review and evaluate Choice's marketing programs and assist in
their implementation, and
(i) review and evaluate Choice's accounting controls and systems.
Manor shall, upon the request of Choice, review and evaluate any other
of the operating systems, procedures, or structures of Choice as both Manor and
Choice mutually agree. In order to provide the foregoing services, Manor shall
make available to Choice the services of the Senior Vice President, Chief
Financial Officer and Treasurer; Vice President, Finance and Assistant
Treasurer; and other management personnel as appropriate.
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A policy of full cooperation shall prevail between the parties and
their authorized representatives with respect to all matters relating to
Consulting Services provided. Each party agrees in good faith to cooperate with
the other party and keep each other (through the representatives) regularly and
reasonably informed of the information, preparation and review of the matters
upon which Choice desires Manor's consultation and advice.
Timing. Any consulting services provided by Manor hereunder shall be
rendered as promptly as practicable taking into account the particular
circumstances of each request and the time reasonable necessary to provide a
report or evaluation. Choice shall provide all pertinent information relating to
each assignment as reasonably requested by Manor. Any and all recommendations,
advise or evaluations shall, at the request of Choice, be embodied in a written
report.
Services Advisory Only. It is further understood and agreed between
the parties that the services to be provided to Choice hereunder by Manor are
consultative and advisory in nature only and that under no circumstances shall
Manor be under any obligation to provide any day-to-day management services with
respect to the operations of Choice.
B. Compensation
Annual Retainer. For and in consideration of the continued agreement
of Manor to render consulting services to Choice as listed in Section A, Manor
will be entitled to an annual retainer fee in the amount of $1,000,000 payable
upon the Distribution Date and upon each annual anniversary thereof during the
term of the Agreement.
Out-of-Pocket Expenses. Choice will be responsible for the
reimbursement to Manor of its reasonable out-of-pocket expenses incurred for
travel, telephone, or like purposes. Reimbursement shall be made on a monthly
basis upon receipt of an invoice describing the nature and amount of such
expenses. Payment shall be made within ten (10) business days of receipt of an
invoice.
Limitation on Service. In no event will Manor be required to expend
more than 2,500 employee-hours per year in providing consulting services
hereunder.
C. Choice's Responsibility; Agency, Best Efforts. Notwithstanding the
consultation and advice to be rendered hereunder, it is understood that Manor
will act in an advisory capacity only. Choice shall have no obligation to
implement any recommendations or advice rendered by Manor. In performing its
services hereunder, Manor shall be an independent contractor and neither party
shall be an agent or representative of the other except as may be specifically
authorized in advance in writing. Manor shall only be required to exert its
reasonable best efforts to perform under this Agreement. In no event may any
provision of this Agreement be construed as or otherwise constitute
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a guarantee by Manor that following any advice rendered by Manor under this
Agreement will attain the stated business objective, it being recognized by the
parties that Choice shall be fully responsible for the business and operations
of Choice and that, in any event, intervening events over which neither party
has any control may preclude the realization in whole or in part of Choice's
objectives.
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EXHIBIT D
TRAVEL MANAGEMENT SERVICES
Travel Management Services. Manor shall provide Travel management services in
accordance with Choice policy and procedures to the extent that they do not
conflict with Manor procedures. Manor's preferred vendor programs shall be used
unless otherwise stated below. Choice and Manor travel volumes shall be combined
for the purpose of negotiating discounts and preferred services for air, car
rental, corporate charge cards, and ground transportation. The scope of services
includes:
Travel Policy and Procedures.
Assistance in developing, updating, and communicating Choice travel
policy and procedures.
Reservations and/or Ticketing.
Reservations and/or ticketing for airline, rail, car rental and
hotels. Availability of Manor negotiated rates and services for airlines and car
rental (and hotel if so desired). Use of Choice preferred hotels and rates for
Choice employees.
Travel Payment.
Central Billings for airline charges, including reconciliation and
downloading to the general ledger. Administration of Corporate Charge Card
program.
Management Information Reports.
Monthly Airfare Exception Report.
Monthly Air Activity by Department.
Reports on demand for air, car rental, and hotel.
SERVICES NOT INCLUDED IN THE BASELINE TRAVEL MANAGEMENT SERVICES CHARGE
Any services which are billed directly to Choice, such as, ground
transportation and courier services.
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Use and maintenance of Manor
developed or new third party software, including, but not limited to,
expense report processing, reservation processes, and management
information reporting.
Fees.
A. Usage Fees - Pass through of all third party charges
B. Activity Based Fees: percent (%) of transactions attributed to Choice
times Net Expenses (defined as total travel services expenses minus
revenue share/ rebates from preferred vendor contracts).
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EXHIBIT E
REPRESENTATIVES
__________________________ - Manor
__________________________ - Choice
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